Blair's Blog

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Sunday, February 25, 2007

First Baptist Church site of first Jefferson School

The Rev. Bruce A. Beard spoke for a few minutes before the Vinegar Hill presentation Saturday afternoon in the First Baptist Church at 632 West Main Street. He’s been pastor since 1993.

Beard said the church was founded by 800 blacks during the Civil War. Back in those days, it was against the law for blacks to congregate and they had to be sponsored by a white church, in this case First Baptist Church at 735 Park Street. The board of directors and first three pastors of the colored church were white.

He said the West Main church was built on the site of the old Delevan Hotel / Civil War hospital. But he did not make the connection to Jefferson School.

During the two-hour program Jefferson School was mentioned several times. Once Steven Meeks of the Historical Society called out to assistant city manager Rochelle Small-Toney, who is in charge of the Jefferson School renovation project, for the date of the origin of Jefferson School. She said 1894.

I was the only one in the 70-member audience who knew that this presentation on Vinegar Hill was taking place on the original site of Jefferson School.

At the end of the program when people were heading toward the basement for refreshments, I informed Small-Toney that I had made the connection to Jefferson School. I now know where the Delevan Hotel was located. She said she’s known all along and that the Delevan Hotel is actually the second Jefferson School, the 1894 building the third and the 1926 building the fourth.

The book, which details the 1865 origins of Jefferson School, cited the same newspaper The Chronicle used as a source in the Vinegar Hill report and was published by the same historical society that sponsored the forum. The book was on sale in the basement. Albemarle: Jefferson’s County 1727-1976 by John Hammond Moore. Excerpts from pages 230 to 234 in the hardcover edition: Origins of Jefferson School and Public Education in Virginia This week both The Hook and C-ville Weekly reported 1894 as the earliest known date for Jefferson School.

“This building was called the Delevan Hotel, and the church came to be known as the Delevan Baptist Church….After the Civil War, education became a necessity and First Baptist was instrumental in holding instructions within its walls, whereby hundreds of freedmen were educated.”

The Delevan Hotel was eventually torn down and the current church building was erected in 1883.

History of First Baptist Church at 735 Park Street “First Baptist Church has a rich tradition both as a local church and as a Southern Baptist Convention pioneer in many areas. It was organized as Charlottesville Baptist Church in August, 1831, with thirty-one members who called as their first pastor Rev. Reuben Lindsey Coleman.”

UVa historian Scot French spoke for the bulk of the 2-hour quarterly meeting of the Historical Society. Research associate Luanne Williams spoke briefly about the technical details of the data and software.

French said the documents in the archive under study came from the Charlottesville Redevelopment and Housing Authority and from the Historical Society, which received a donation of assessment records presumably from the city assessor’s office.

He called out to fellow researcher Anique Downes for the total number of documents in the collection. Downes estimated between 14,000 and 16,000 documents.

French explained how a vibrant black community evolved in Charlottesville after the Civil War. During this period white Charlottesville was more tolerant of blacks owning property even as other parts of the deep south was already cracking down on blacks. French had no explanation for this but did say that blacks outnumbered whites in Charlottesville and that the white population has since grown mainly due to annexations.

Others have written that, in order for the minority to exert control as the nation marched toward war, the 1850s was bloody with spectacles of lynching and torture locally. After the Civil War nobody talked about it and most documents were lost. But the children remembered and began talking about it when they became adults. This collective memory lingered for decades. Charlottesville became less tolerant as a new generation came to power. Other communities had a more peaceful pre-Civil War history.

French said it wasn’t until the 1910s when Charlottesville began enacting segregation zoning laws. In 1912 the U.S. Supreme Court ruled such zonings Unconstitutional. But by then the “separate but equal” doctrine had taken hold. Other ordinances were passed that sought to create a sharp line between black and white.

But the fuzzy residential segregation patterns created a problem. You could have certain streets and certain blocks that were black or white. A few citizens protested but were unable to stop the west Belmont compromise of 1916. The development of that plantation would be for white people. So at the western edge along old Scottsville Road, blacks lived on one side and whites on the other side of the same street. Most people know this as 6th Street SE now mostly open space following the 1970s urban renewal.

French said deed covenants became the new tool to preserve residential patterns along racial lines. Paul Goodloe McIntire donated land to become a park on Preston Avenue for blacks to be named after Booker T. Washington. The park was actually named for George Washington the first president and later George Washington Carver. (McIntire also donated Belmont Park and stipulated in the deed that it be for white people.)

Booker T. Washington came to prominence in the mid-1890s when the backlash against blacks was at a peak. The principles of land ownership espoused by Washington for newly freed blacks were already paying dividends in Charlottesville. The rise of the black real-estate speculators was documented in The Chronicle. Booker T. Washington visited Vinegar Hill numerous times.

Researcher Luanne Williams talked about the actual project. When ready, anyone should be able to search online the names and addresses, deeds and assessments, photos and maps. Williams said the collection comprised

Saturday, February 24 at 2:00 p.m. at First Baptist Church, 632 W. Main Street, Charlottesville"Virtual Vinegar Hill: Preserving an African American Memoryscape"Speakers: Reginald Butler and Scot French

An African American residential-business district born of late-19th and early-20th century black enterprise -- was declared "blighted" by local authorities and demolished under the federally funded Urban Renewal program. Civic leaders and project boosters hailed the demolition/redevelopment project, coupled with the opening of modern public housing complexes for those displaced, as a much-needed facelift for the downtown area. Yet, for Charlottesville's African American citizens, many with personal ties to the Vinegar Hill neighborhood, the urban "removal" project left a gaping hole in the landscape and produced a profound sense of loss that lingers to this day. The project came to symbolize the displacement of the African American working and business classes, the destructive impact of urban renewal/gentrification on African American community life, and the erasure of African American history from Charlottesville's commemorative landscape.

Today, researchers from the Carter G. Woodson Institute's Center for the Study of Local Knowledge are working with local residents, the Albemarle Charlottesville Historical Society, and the City of Charlottesville to digitize photographs, oral histories, and public records related to Vinegar Hill, with the aim of building an online archive and virtual tour of this urban "memoryscape." U.Va. historians Reginald Butler and Scot French and research associates Schuyler Esprit, LuAnn Williams, and Anique Downes will give a brief overview of the project and a demonstration of key features.

Butler and French are associate professors in the Corcoran Department of History at the University of Virginia and co-founders of the Carter G. Woodson Institute's Center for the Study of Local Knowledge (CSLK). "Virtual Vinegar Hill" is part of their "Race and Place" project, a longstanding collaboration between CSLK and the Virginia Center for Digital History.

Wednesday, February 21, 2007

“Between 1949 and 1973 … 2,532 projects were carried out in 992 cities that displaced one million people, two-thirds of them African American,” making blacks “five times more likely to be displaced than they should have been given their numbers in the population.”

"As of June 30, 1967, urban renewal had destroyed 400,000 housing units and built only 10,760 low-rent units to replace them."

Published February 2007Institute for Justice series "Perspectives on Eminent Domain Abuse"

“Eminent domain has become what the founding fathers sought to prevent: a tool that takes from the poor and the politically weak to give to the rich and politically powerful,” concludes Dr. Mindy Fullilove in her report titled, “Eminent Domain & African Americans: What is the Price of the Commons?”

Eminent Domain & African Americans is the first in a series of independently authored reports published by the Institute for Justice, Perspectives on Eminent Domain Abuse, which examine the different aspects of eminent domain abuse from the vantage point of noted national experts.

In the endnotes, the author cites a Roanoke newspaper article as an example of sources that have estimated the one million figure for the urban renewal diaspora from 1949-1973. This number does not include people displaced by eminent domain for other purposes or since 1973. "Street by Street, Block by Block: How Urban Renewal Uprooted Black Roanoke" by Mary Bishop, The Roanoke Times, Jan 29, 1995.

I visit a friend in Roanoke a few times a year. He moved there in 2003. Just driving around certain parts of Roanoke, it looks like a war zone people decided not to rebuild. The debris have been hauled away. What remains is empty lots all over the place. My friend doesn't know the truth about Roanoke.

On December 3, 2006 while I was visiting, The Roanoke Times reported that city Democrats have a plan to uproot more black people ("Democrats form caucus after party's ouster plans"). Well, they didn't use those words but that's what black people heard.

"The Roanoke City Democratic Caucus gives us a meaningful vehicle to keep Roanoke moving forward with a positive plan of growth, economic development and first-rate schools and facilities," said Evelyn Powers, Roanoke Treasurer.

On the same page begins an article that explores why there is a "wide racial disparity in how residents view the newspaper" ("Readers must help diversify newspapers" by Shanna Flowers).

The Democratic Caucus uses code words for more status quo. The paper doesn't report what the code stands for--displacing more people, creating more empty space, and perpetuating failed schools. By not informing its new readers periodically of the truth behind city politics, The Roanoke Times is complicit in the injustice.

And even the black reporters at the newspaper have no idea why blacks don't trust the local paper. The paper doesn't know it's not about skin color. It's about content.

Here in Charlottesville, the Carter Woodson Institute will display photos of urban renewal Saturday Feb. 24 at 2pm at First Baptist Church on West Main Street. It's unknown whether any text documents, such as a deed, condemnation notice or newspaper clip, will be on display.

Monday, February 12, 2007

Update on urban renewal archives: 287 more photos

Aerial Photo of Vinegar Hill 1960

BeforeAfter at Ridge and West Main, Lewis and Clark statue

Charlottesville, Va.-- Last Monday February 5, I photographed with my digital camera 287 Housing Authority archive photos in a 152-page notebook. After three phone calls in January to arrange an appointment, assistant city manager Rochelle Small-Toney called me Monday morning and I happened to be off due to extreme cold. She arranged that a notebook of archives be brought to City Hall and I took the photographs from about 3:00 to 3:45pm.

I have photo CDs available and have given away three already. The picture CDs can be viewed on some DVD players. It plays on mine but did not play on two other models tested.

The photos are not limited to Vinegar Hill or urban renewal. There is a photo of Lafayette Theater. Main Street before the pedestrian mall. 4th Street SE underpass showing Miller & Rhoads and absence of Water Street parking garage. H.M. Gleason. Garrett Street. Relocation office on Ware Street. Cox's Row. McGuffy School. And many photos I can't identify.

This was my third visit to view and copy the Housing Authority's archive record. On the first visit: 10 unidentified houses and 7 aerial views following Vinegar Hill clearance. On the 2nd visit: 8 photos of 6 houses on Ware Street including my grandmother's house.

Total documents I have copied from CRHA is 312. This number does not include documents I've copied from city assessor's office, Historical Society, Special Collections at Alderman, newspaper archives and other sources. I have not yet seen the information donated to Special Collections after the Frank Ix and Sons textile mill closed in 1999.

I don't have enough web storage space for all the photos. But I'm working on it. I should have another update by February 24 in the effort to reconstruct one of the stories of Charlottesville.

Mayor David Brown said the purpose of historic designation is to prevent property owners from demolishing their historic homes. Brown doesn't know that blacks want a designation to prevent the city's agencies from demolishing historic homes.

Councilor Julian Taliaferro was the biggest denier of Charlottesville history by saying the concerns of blacks is an example of "perception greater than reality." During his campaign for office, at least twice, Taliaferro dismissed statements by the public as untrue, based solely on his inability to believe the truth.

Tonight, the councilors were responding to Ann Carter, who owns 324 6th St. SW. In her public comment, she listed out some history the councilors continue to dismiss as untrue.

But I don't believe Ms. Carter is a lier. I'm working on a big story now and will try to contact her so her truth can be included. Monday I photographed 152 pages of Housing Authority archive photos, none which concern the sites in the news in 2006. The text documents are still being withheld. Nobody knows the total number of documents UVa professor Scot French of the Carter Woodson Institute is "safeguarding." On Feb. 24, there will be a discussion on this topic at First Baptist Church with time to be determined.

The podcast at the city's website is not up yet. Also the Nov. 20 podcast is not available, the meeting where Council refused to release urban renewal archives.

Tuesday, February 06, 2007

New perspective on illegal Habitat houses

"The Covenants on the deeds (as I understand it) stipulate that Habitat gets "right of first refusal" on any sale of the house. They get first shot to buy the house back at fair market value." ( Read the full 17-paragraph comment )

What if the owner is willing to sell at a price greater than fair market value? If the house is assessed at $200,000, can the Habitat owner sell it for $300,000? Or does the covenant stipulate that only Habitat can buy the house and at a price lower than the owner's selling price? Can Habitat then sell the house for $300,000? I can't think of anything I can sell and require the buyer to sell it back to me at my price if they ever decide to sell. If you view your house as an investment, you should avoid predatory lenders like Habitat.

Monday, February 05, 2007

Momentum building for eminent domain reform in Va.

But let’s not pretend the Republicans’ bill would cripple municipal economic initiatives or urban renewal. The city councils have an array of potent pump-priming tools, including tax incentives, subsides, favorable zoning concessions and public-private partnerships. If there is to be an error in rewriting the rules of eminent domain, lawmakers must err on the side of the fundamental rights of the property owner, not the financial interest of the government, or the developers with whom it is so often entwined.

Back in 2001, Cumberland County officials decided they didn't need the Luther P. Jackson Elementary School on U.S. 60. The 32 classrooms had been empty for years and the building was a wreck. The county declared the property government surplus and put it up for auction.

Mary Meeks, a Farmville Realtor, bid $110,000. It took two more years to clear the title, but in 2003, Meeks closed the deal. She spent $250,000 to repair and renovate the old school. Four churches and an appliance store moved in while she tried to persuade the county to let her convert the building into apartments.

That's when school officials decided they needed the school after all, and when Meeks' expensive education in the cruelty of Virginia's eminent domain laws began.

The county wanted the building to house several hundred students while a new middle school was being built nearby.

Meeks offered to rent space to the county, but officials wanted to own the building. When they couldn't agree on a price, the county's lawyer filed papers justifying what's known as a "quick-take" and deposited $200,000 in an account to compensate Meeks.

When the state takes somebody's property, Virginia's Constitution entitles them to "just compensation." But Meeks discovered that her rights to that just compensation were protected more in name than in fact.

So, where did those rights go? They were hollowed out by years of concessions from the General Assembly to local governments, state agencies, utility companies and redevelopment authorities, and by the acquiescence of Virginia's judiciary.

The extent of the loss is prove d by the weak hand Meeks holds when she arrives in court this week to appeal the county's treatment. She is classified in legal filings as the "defendant," the presumption being that she has done something wrong.

A judge will hear arguments about whether the government was reasonable when it set aside $200,000 for the Meeks property when the county's own tax assessor says the land and improvements are worth $609,000.

Common sense would argue that the assessment gives Meeks an advantage in prying more money from the county. Except that she can't use it. Virginia courts won't permit tax assessments to become evidence for property owners.

Meeks' complaint could take years of motions, hearings and accumulating legal expenses to settle. To compound the injustice, the commonwealth's eminent domain laws oblige Meeks to keep paying the mortgage as long as she fights.

She doesn't even get the rent from the churches and small businesses in the building. That money goes to the county.

The playing field is so tilted against Meeks that if the financial pressures force her to surrender and take the $200,000, she loses the right to challenge the constitutionality of the taking.

In other words, the law pressures her in several ways to settle for less money than her property is worth because it will be so expensive to defend her rights.

It is just as unlikely that a judge will find the county did anything wrong. The Virginia Supreme Court in 2006 ruled that judges have no business reviewing whether local officials recklessly used their eminent domain power. That eliminates one of the few checks or balances on officials abusing their extensive authority to take private property.

Cumberland County officials should have known better than to sell off a school they would need so soon. For the sake of argument, let's concede that officials made a good-faith miscalculation and a legitimate public need was served by taking back the school. If that's true, then what can possibly justify the county's financial punishment of Meeks?

The proper course would have been for Cumberland officials to acknowledge their mistakes and make Meeks whole by paying her what her property is actually worth.

Instead, even if Meeks prevails and proves that she was cheated, she will have to pay all her legal expenses - court costs, experts, lawyers and appraisers - from her final award. In other words, even if she wins, she will walk away with less than her property's fair-market value.

Despite all of Virginia's vaunted protection of property rights, Meeks' case proves that some misguided officials act on occasion with impunity, taking people's livelihood and property while the law lacks safeguards to prevent it. The gaps in state protection for people like Meeks ensure that even if she wins in court, she won't win the justice - financial or otherwise - she deserves.

Since the U.S. Supreme Court opened the door for governments to confiscate someone’s home and sell it to a developer, 34 states have enacted property rights safeguards into law.

On Election Day last November, voters in nine states passed constitutional amendments to make sure officials avoid the new temptation to exercise condemnation powers for purely economic development reasons.

Virginia is conspicuously absent from this national consensus. When asked why, the answer given by lawmakers, lobbyists and municipal administrators goes like this: We’re a property rights state and local governments can’t do the things permitted by the high court’s 2005 Kelo ruling.

While it’s true that Virginia law expressly bans government confiscations for economic development, that hasn’t stopped such things from occurring under other names and pretexts. Last year, the House of Delegates and Senate deadlocked over whether the loopholes that permit such abuses will be acknowledged and closed, or just ignored and tolerated.

In the coming weeks, the Assembly will try again, but the prospects are dim for real reform.

And it’s just as unlikely that lawmakers will do anything about another, even bigger category of eminent domain excesses: the unfair treatment of property owners when their land is taken for indisputable public necessities, such as for building roads or fighting blight. If the cruel treatment of Mary Meeks, whose case was profiled yesterday, isn’t enough reason for alarm, then a new comprehensive study has arrived just in time.

“The Real Story of Eminent Domain in Virginia,” by property rights attorney Jeremy P. Hopkins, debunks the notion that landowners are well protected from government overreaching. The study was sponsored by the Virginia Institute for Public Policy, a libertarian advocacy group. A copy is on its Web site, http://www.virginiainstitute.org/.

Hopkins catalogues injustices too numerous to be dismissed as isolated aberrations. He has amassed carefully footnoted evidence pointing instead to an official prejudice against property owners embedded in our laws, in our politics, and in our courts.

Here are but a few recent examples from his study:

- The Supreme Court of Virginia in 2003 allowed Hampton to take far more land than was needed for a new road, then lease the rest to the developer of the Power Plant project. The government used 20 percent of the property owned by Frank and Dora Ottofaro for a road, then leased the other 80 percent to the developer. Such a case opens the door for local governments to condemn land as a pretext for benefit ing developers. To add insult, the city bulldozed a house on the property before the case was settled.

- Last year, the Supreme Court of Virginia permitted a condemnation by Alexandria to help rid a developer of an obstacle. To better arrange his land for condos, shopping and offices, the developer wanted to move a drainage culvert onto the land of an adjacent owner, who resisted. Alexandria officials acknowledged that the condemnation was done just to assist the developer. Not even the Supreme Court in the Kelo ruling went this far. It drew the line against takings that confer a purely private benefit on an particular private party.

- The Board of Supervisors in Halifax County condemned one person’s land at the request of his neighbor, who wanted it for a paved driveway. The landowner even put the money up. Now, state taxpayers are maintaining the mile-long road, though it serves only one family. The local court upheld the taking and the Virginia Supreme Court refused to hear an appeal.

- During the construction of Route 221 in Bedford, the Virginia Department of Transportation used a new car wash as a staging area for its construction equipment. For a year, the disruption cost the owner half his business. In a hearing to determine damages, the judge refused to permit the owner to enter any of this into evidence before a jury and ruled the owner was not entitled to recover any money. The state Supreme Court refused an appeal. It could have been worse: The car wash owner could have been put out of business entirely, but legally would have no claim against the state.

- The Norfolk Redevelopment and Housing Authority took a vacant Park Place home for $40,000 when it said it couldn’t find the owner. It didn’t check the house, however. The father of the owner, a New Jersey policewoman, was renovating it at the time. NRHA obtained the house merely by placing a public notice in an obscure publication, but not on the house itself. Generally, in default judgments, Virginians have two years to reopen a case to correct an injustice. Except in condemnations. In condemnations, former owners have been specifically denied that right. Two months after the taking, the owner learned what happened to her Park Place home. But the court said it was too late.

The Republican caucus in the House of Delegates is attempting to restore some balance between individual rights and the public good, offering up strong legislative medicine to cure the potential for economic abuses. By drawing a sharp line against job- and tax-creating condemnations, for example, the House legislation eliminates the ambiguities that have invited them.

The challenge facing lawmakers in the coming weeks is drafting a law that ends abuses without handcuffing public works departments, redevelopment authorities and utility companies. Critics argue that the restrictions being considered are drawn too tightly and that some worthwhile projects might not get built.

But let’s not pretend the Republicans’ bill would cripple municipal economic initiatives or urban renewal. The city councils have an array of potent pump-priming tools, including tax incentives, subsides, favorable zoning concessions and public-private partnerships.

If there is to be an error in rewriting the rules of eminent domain, lawmakers must err on the side of the fundamental rights of the property owner, not the financial interest of the government, or the developers with whom it is so often entwined.

As Virginia’s own Thomas Jefferson said: “I would rather be exposed to the inconvenience attending too much liberty, than those attending too small a degree of it.”

As it weighs the trade-offs in lawmaking, and in eminent domain reform, the General Assembly ought to look to Jefferson for inspiration.

RICHMOND - Del. Robert Bell speaks plainly about why he is trying to amend the state constitution.

"We want to make it more difficult for government to take your home," said the Republican from Albemarle County.

Bell and others believe the rights of homeowners have been abused around the state, by the Virginia Department of Transportation, by cities and by housing authorities.

He is among nearly a dozen legislators who have proposed legislation to limit eminent domain, or the power of government to go to court and take private property.

The most hotly contested legislation is expected to be his constitutional amendment - HJ723 - which goes to the House floor this week.

It forbids government from taking land for anything other than a "public use," such as a school or a road.

It also forbids government from taking a home that isn't blighted in a redevelopment area and outlaws the taking of land for economic development purposes.

He has worked closely with Del. Johnny Joannou, D-Portsmouth, who said eminent domain laws need an overhaul.

Chip Dicks, a real estate attorney and former Democratic delegate from Colonial Heights, said Bell's fix is too vaguely worded and goes too far. While saying homes can't be condemned for economic development reasons, the proposed amendment doesn't define "economic development," he said.

"Any taking, for a road or for a school, is probably going to improve property values," Dicks said, which courts might interpret as economic development.

"This amendment is going to send hundreds of cases to the courts," he said.

The U.S. Supreme Court in 2005 ruled that homes that are not blighted can be condemned for economic development if state law allows it.

In response, dozens of states have rewritten their eminent domain laws. An effort by Del. Terrie Suit, R-Virginia Beach, to clarify Virginia's law during last year's session ended in failure, as both sides clashed on how far to go.

Housing rights advocates and local officials have worked to craft a compromise, with several meetings occurring in the offices of Attorney General Bob McDonnell.

"We continue to meet," Bell said. "We hope to reach a compromise before the session is over."

Much of the debate has focused on the Norfolk Redevelopment and Housing Authority.

Proponents of the status quo point to the city's successful revitalization of downtown, Ghent, Broad Creek and Ocean View, and say eminent domain helped.

Even though Norfolk has claimed some housing that wasn't blighted, Dicks said there has been no abuse about which he knows.

Yet opponents - including Jeremy P. Hopkins, a counsel with the Norfolk law firm of Waldo & Lyle - say there have been abuses in Norfolk.

In association with the Virginia Institute for Public Policy, Hopkins wrote a paper titled "The Real Story of Eminent Domain in Virginia."

It has become a bible of sorts for eminent domain conservatives. Norfolk's housing authority is the culprit in much of the paper, which also criticizes other cities and VDOT.

Amendment opponents warn that building the East Beach community in East Ocean View might be impossible under Bell's bill, because it forbids taking non blighted homes.

In East Beach, 1,600 residences in a high-crime community were demolished by the housing authority. Developers are building 750 upscale houses in their place.

Ocean View native Steven D. Anderson, an attorney for the Arlington-based Institute for Justice, said regardless, private property rights should be protected.

"Development is not going to stop under those circumstances," he said.

"And even if it does, I'd rather live in a state that recognizes you don't have to give up your property if you haven't done anything wrong."

Taking of Prosperity: economics of eminent domain

Potential residents and businesses may avoid communities that have a record of taking private property for economic development because of a greater uncertainty about losing their property to eminent domain.

The U.S. Supreme Court’s decision in Kelo vs. New London was an unlikely source of public outrage. After all, the court didn’t overturn anything in its June 2005 ruling; it merely affirmed an earlier decision by the Supreme Court of Connecticut. That decision allowed the city of New London, which was officially designated as “distressed,” to use the power of eminent domain to acquire 15 properties, one of which belonged to homeowner Susette Kelo. Although forcing the sale of homes always raises delicate issues, it is not an unusual event. Furthermore, nothing in the court’s decision altered the ability of state legislatures to limit the practice of eminent domain. Viewed in this way, the decision in Kelo should have been one of the lower-profile decisions of the Supreme Court that year.

That’s not how things went, however. The reaction against both the court and its decision was swift and furious. The U.S. House of Representatives passed a resolution denouncing the court.

(1) The House also passed a bill that would withhold federal development funds from states and political subdivisions that use eminent domain in certain ways.(2) Since the Kelo decision, 34 states have taken action to limit eminent domain: 26 have passed statutes, five have passed constitutional amendments and an additional three have passed both. (Five of the seven states in the Eighth Federal Reserve District have passed statutes.(3) President Bush issued an executive order limiting the grounds on which the federal government can take private property.(4) Finally, the Supreme Court of Ohio handed down a ruling in a case that, by the court’s own assessment, raises social and legal issues similar to those in Kelo.(5) Drawing upon the reasoning of several dissenting judges in the Kelo case, the Supreme Court of Ohio gave property owners the protection that was denied to Susette Kelo in Connecticut.

This brief survey of the response to Kelo suggests that its shock waves are likely to reverberate for some time. Nevertheless, we are far enough beyond the Kelo ruling that we can review the main issues with the knowledge that the most speculative and feared consequences of Kelo—free-for-all takings for economic development—have not yet occurred.

A History of Eminent Domain

The U.S. Supreme Court has long recognized in the federal government the power to acquire private property for public use. This is true even though the term “eminent domain” does not appear in the Constitution or the amendments.6 The power is limited, however, by two restrictions. First, as with any federal action, the use of eminent domain must be “necessary and proper” in accordance with the congressional powers enumerated in Article 1, Section 8, of the Constitution. Second, the use of eminent domain must obey the final clause of the Fifth Amendment, which states, “Nor shall private property be taken for public use, without just compensation.”

The Fifth Amendment did not apply to state governments prior to the 14th Amendment. By the late 19th century, however, the due process clause of the 14th Amendment came to be regarded as requiring the states’ use of eminent domain to be consistent with federal interpretations of public use and just compensation. A state is free to establish a more-restrictive concept of public use than the U.S. Supreme Court finds in the Fifth Amendment, just as a state could require “more than” just compensation for a taking, but not a less-restrictive concept. Although state governments have the legal ability to establish, to some degree, their own laws regarding eminent domain, local governments like that of the city of New London have only those powers granted to them by state constitutions and statutes.

Although Susette Kelo’s house was in a distressed city, neither her house nor any of the other properties was in poor condition. Rather, the city acted under the authority of a Connecticut statute that (more or less) explicitly declared that the taking of land for purposes of economic development was a taking for public use. The city’s economic development plan designated the parcels for office space, parking and retail services. This scenario highlights the central issues of the Kelo case: What is a “public use,” and does the answer to this question given by a state legislature matter?

Public Use, Public Purpose and Judicial Deference

In its majority opinion, the U.S. Supreme Court stated in Kelo that the government can never take property from one private party for the sole purpose of giving it to another, even if just compensation is paid. On the other hand, the government can always do so if the general public acquires some actual use of the property. The court has been defining the ground between these extremes since the late 19th century.7 From the start, “it embraced the broader and more natural interpretation of public use as ‘public purpose,’ ” the court said in Kelo.8 More precisely, the court began to argue in the late 1800s that if property is taken to create a widespread benefit, then it is “put to” a public use and satisfies this requirement.9

At the same time, the court developed the language and rationales for deferring to legislative declarations about public use and purpose. The majority wrote in Kelo, “For more than a century, our public use jurisprudence has wisely eschewed rigid formulas and intrusive scrutiny in favor of affording legislatures broad latitude in determining what public needs justify the use of the takings power.”10 In particular, if a state declares that the removal of blight serves a public purpose or land redistribution does the same, then the court would not subject those claims to close scrutiny.11

Thus, following this line of thought, the court essentially declared that it would defer to legislative declarations about public use unless, in a particular application, they were transparently covering up a purely private transfer of property. The court decided this was not the case in Kelo.

The Economics of Kelo

Economist Patricia Munch provides an analysis of the economics of eminent domain. In her model, a land developer needs to assemble contiguous parcels of property. All parcels have identical characteristics, and there is nothing special about any particular location. The lowest price a property owner will accept (his “reservation price”) for his property differs across property owners. Munch assumes that each developer offers all owners the same price for their properties and that this price is the (expected) maximum reservation price of all property owners. Munch then argues that the full additional cost of adding a parcel to a development is likely to be larger than just the cost of that parcel. The reason is that, if the developer only needs a few parcels, then he can easily find a cluster in which the maximum reservation price is low. Since the developer (by assumption) pays the maximum reservation price to each owner, it follows that the cost of each parcel is relatively low. The larger the number of parcels the developer needs to assemble, however, the more difficult it is to find a cluster with a low maximum reservation price. The general result is that, as long as the developer can do a little searching, the per-parcel cost will be strictly increasing with the number of parcels.

It is not hard to see that the result is likely to be inefficiently little land assembly. As in the standard single buyer story (what economists term a monopsony), assembling more parcels requires the developer to offer each homeowner the same (high) price. Assembly stops when the cost to the developer of adding a parcel equals the benefit to him from adding it. In other words, assembly stops when there is no additional profit from adding parcels. The problem, however, is that if the developer could offer different sellers different amounts of money (i.e., he could price discriminate), he could probably offer them prices at which they willingly sell and at which he makes a larger profit. One could argue that the sellers and the buyer should figure this out, but it is expensive for the developer to deal individually with homeowners, and homeowners are reluctant to sell at prices below recent offers. As long as all parcels must sell for the same price, there are likely to be willing sellers whose homes are not purchased.

Now suppose the developer has the power of eminent domain. This makes the reservation prices irrelevant: Every homeowner is paid the market price for his home. Now, land assembly stops when the market price equals the benefit to the developer from adding the parcel. The problem in this case is that the market price is below the reservation price for some of these sellers. In other words, they are unwilling sellers. The result is too much land assembly under eminent domain.

Munch notes that the assumption that the developer is a single buyer is central to the analysis. If there is competition among developers, then some will develop better techniques for determining seller reservation prices. If communities choose these developers, then more-efficient land assembly will result.

Munch also briefly discusses the “holdout” problem. She notes that there is no inefficiency when the owner of a parcel that has some unique value (perhaps as a location) tries to benefit financially from its uniqueness. The only genuine holdout problem she considers occurs if some sellers believe that other sellers did not capture all the rents that were possible to them in their transactions with the developer. Misinformation and speculation along these lines could, once again, prevent willing buyers and willing sellers from reaching a transaction.

The Public Good vs. Public Goods

Although the work by Munch suggests eminent domain can improve upon market outcomes under certain conditions, her analysis fails to address several economic issues involving eminent domain that have broader implications for economic development and growth. Specifically, any economic analysis of eminent domain as it relates to the Kelo decision must recognize the tradeoffs inherent in giving local governments this kind of power over local economic development. Those who approve of eminent domain as it was used in Kelo fail to recognize the difference between what economists call “private goods” and “public goods.” They also fail to see the inefficiencies often generated from government intervention in private markets.

An understanding of the differences between a public good and a private good and the ineffectiveness of governments in providing a private good reveals the incorrect premise behind the Kelo decision.12 Private goods are both “rival in consumption” and excludable. Rival in consumption means that one person’s consumption of a private good denies others the opportunity to enjoy the good. The price of a private good is essentially a result of the good’s scarcity—as additional resources are employed to produce more of the good, the opportunity cost and, thus, the marginal costs, of producing the private good rises. This increasing opportunity cost increases the price and, as a result, some individuals will be excluded from consuming the good because they are not willing to pay the higher price.

Unlike a private good, a public good is both non-rival in consumption and non-excludable. The textbook example of a pure public good is national defense; other examples of similar goods include parks and highways.13 One person’s consumption of a public good does not deny others from consuming the good, and people can use the public good without paying for it. As a result, the marginal cost of an additional user of a public good is zero, and this suggests a market price of zero. Economists justify public (government) provision of public goods because too little of the good would be available (given a market price of zero) if production of the good was left to the private market.

Government provision of public goods and, thus, the taking of private property to provide these goods, can be justified under the narrow definition of public use, i.e., used by the community as a whole. However, the taking of private property from one person and giving it to another for economic development, even if one considers the holdout problem and payment of just compensation, is unlikely to create a net benefit to society. It is more likely to create economic inefficiencies and to reduce economic growth.14

Historical anecdotal information and formal academic research show that, in general, countries with less government involvement in private markets experience greater levels of economic growth.15 The only possible exceptions in recent times are the Asian Tigers (e.g., South Korea, Taiwan and now China), but even there, markets are used extensively, and the strategies used by those governments have been difficult to replicate elsewhere. When governments interfere in the private market, whether it be a market for apples, cars or property, the likely result is greater economic inefficiency and less economic growth. The reason is that even the most well-intentioned policymaker cannot comprehend or replicate the complex interactions of buyers and sellers that occur in free markets.

Of course, there will be certain groups that do benefit from the taking of private property, such as developers, property managers and local politicians. Developers and property managers will gain income from developing the property. Many local politicians favor targeted economic development because of what they see as the immediate benefits from development, such as increased employment and tax revenue. These economic benefits also translate into political benefits for those politicians who pledge to improve local economic development. Not realized, however, is that the supposed immediate and tangible benefits from taking private property for economic development are outweighed by the greater economic costs of government intervention in private markets.

Local Governments and Economic Development

The use of eminent domain for economic development as established by Kelo complements already existing economic development tools such as TIFs (tax increment financing), tax breaks, local development grants, etc. Local governments use all of these options to target specific projects in their area because of a perception, whether real or imaginary, that the local area suffers from a lack of growth. All of these economic development tools, however, are unlikely to lead to an overall increase in societal welfare because each tool simply involves a transfer of income from one group to another, often resulting in a zero-sum gain.

A simple example can illustrate the point. Suppose a local government takes $10,000 from Peter and gives it to Paul, who plans to open a business. Paul then uses the $10,000 to open his business, which creates tax revenue and jobs. From a social welfare point of view, Peter loses $10,000 and the savings or consumption benefits of his $10,000, Paul gains $10,000 to open a business, and jobs are created. By taking the $10,000 from Peter and giving it to Paul, the local government is essentially saying that Paul can create greater societal wealth with Peter’s $10,000 than Peter can. The same would be true if local governments paid Peter for his house and then gave the property to Paul for development purposes.

Of course, it is impossible for local governments to know if greater wealth would have been created by allowing Peter to keep his $10,000 rather than giving it to Paul. Economic theory tells us that in the absence of incomplete information or externalities, free markets will result in the most efficient allocation of resources and greater economic growth. By replicating the above scenario across thousands or millions of individuals, the likely result is that the costs and benefits will average out to be the same, thus creating a zero-sum gain. Thus, the same level of economic development would have likely occurred if Peter kept his original $10,000.

There is reason to believe, however, that a zero-sum gain is not the worst case outcome. In the face of a policy decision like eminent domain, individuals and interest groups on both sides of the issue will expend resources (e.g., campaign contributions, the cost of one’s time in campaigning for an issue, etc.) to ensure that the policy decision will favor their respective position. This rent-seeking by opposing groups results in a net economic loss because both groups will expend resources to ensure a particular outcome, but only one outcome will occur. In the above example, even if the transfer of $10,000 from Peter to Paul created a zero-sum gain, the resources Peter and Paul expended to influence the policy outcome will result in a total economic loss for society rather than a zero-sum gain. Most likely, the policy outcome will be that desired by the interest group that has expended the greatest resources. As Justice Sandra Day O’Connor states in her dissent to Kelo, “The beneficiaries (of eminent domain) are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms.”16

What can governments do to promote economic development that yields positive economic growth? Rather than use eminent domain or other tools to target individual economic development projects, local governments should ask the fundamental question as to why the desired level of economic growth is not occurring in the local area without significant economic development incentives. For example, are taxes too high, thus creating a disincentive for business to locate to the local area? Do current regulations stifle business creation and expansion? All of the targeted economic development in the world will not compensate for a poor business environment. From a regional perspective, local governments should focus on creating a business environment conducive to risk-taking, entry and expansion rather than attempting targeted economic development through eminent domain or other means.17

Indeed, there is some risk for local communities that use eminent domain for economic development. One requirement for a well-functioning private market is secure property rights. Research has shown that without property rights, individuals will no longer face the incentive to make the best economic use of their property, be it a business or home, and economic growth will be limited.18 The Kelo decision essentially says that individuals can lose their property if the local government believes it needs the property to generate greater economic benefits. Potential residents and businesses may avoid communities that have a record of taking private property for economic development because of a greater uncertainty about losing their property to eminent domain.

Conclusion

The Kelo decision by the U.S. Supreme Court was met by great opposition from the public and many local government officials. Numerous public opinion polls taken immediately following the ruling revealed that the vast majority of Americans disagreed with the court’s ruling.19 Supporters of Kelo argue that using eminent domain for private development will spur economic growth. Although a lack of sufficient data currently prevents empirically testing the economic effects of eminent domain described in this article, economic theory certainly suggests that eminent domain used for private economic development will likely result in a zero-sum gain and may actually hinder economic development in the local areas, as well as the region, rather than help.

Select U.S. Eminent Domain Laws and Court Rulings

1) Fifth Amendment to the U.S. Constitution (1791)

“Nor shall private property be taken for public use, without just compensation.”

This statement is commonly referred to as the “takings clause.” Most courts have equated just compensation with a property’s fair market value. Narrowly defined, “public use” requires that the taken property be used by the public at large— what economists call a public good.

2) Fallbrook Irrigation Dist. vs. Bradley, 164 U.S. 112 (1896)

In a case concerning the requirement that a group of property owners pay for the building of an irrigation ditch, the U.S. Supreme Court ruled that the irrigation of arid land served a public purpose and the water used was “put to” a public use. This is an important early case in the development of the public purpose doctrine.

3) Berman vs. Parker, 348 U.S. 26 (1954)

The U.S. Supreme Court ruled that taking private property (and paying just compensation) to remove blight served a public purpose and met the requirements of the Fifth Amendment. This was true even though the seized property was sold to private interests and would not necessarily have a wide use by the public.

4) Hawaii Housing Authority vs. Midkiff, 467 U.S. 229 (1984)

The U.S. Supreme Court ruled that a state could use eminent domain to take land from private landowners and allocate it to others. The case was based on the state of Hawaii’s complaint that a vast majority of the privately held land in Hawaii was in the hands of a few landowners, thus limiting competition in land and property markets. Berman vs. Parker served as precedent for the ruling.

5) Kelo vs. New London, 545 U.S. ____ (2005)

The U.S. Supreme Court ruled that eminent domain could be used to take land from one private landowner and give it to another for the sake of economic development. Berman vs. Parker and Hawaii Housing Authority vs. Midkiff served as precedent for the ruling. Critics of the Kelo ruling argue that the court misinterpreted the Fifth Amendment by further broadening “public use” to mean “public purpose.”

More information on these cases can be found at www.findlaw.com/casecode/supreme.html. Other eminent domain cases can be searched at http://caselaw.lp.findlaw.com/casesummary.